sunset from behind the wire

Sunday, January 22, 2017

Mexico Today

Context and Precedence

Some of you who read this blog have commented that you are interested in current events in Mexico. Because of that, I'm giving you a brief update from my perspective.

There will be riots and demonstrations again in Mexico today. It will be bad in Tijuana. It's been bad enough lately that the USGOV has shut down the border crossing points from time to time. There is talk about the people taking over city hall in Tijuana today and I expect that you'll see that happen.

The mainstream media is focused on who designed Melania Trump's dress and how the designer needs to be punished socially, on how they really don't like that Donald Trump took the office and is now President, and how to get Hillary to take his place. But the situation in Mexico is dire in many parts of the country.

Gasoline

For a very long time (Petróleos Mexicanos)PEMEX , the Mexican national petroleum company explored, drilled, pumped and refined its own oil, providing the public with lower priced gasoline that still returned a profit to the State.

The Mexican drug cartels, most particularly Cártel de Jalisco Nueva Generación (CJNG), have laid pipes, tapping into PEMEX facilities and literally fill their own fuel trucks within sight of the PEMEX refineries. If anyone complains or the police get involved, they are murdered. Thus the cartels make billions of dollars by selling black market gasoline.

For the record, most drug cartels make more money on other businesses than they do on the drug trade. Some of those businesses are "legitimate", some as with fuel thefts, are not.

The U.S. private equity fund KKR and Mexico's Pemex concluded a $1.2 billion sale and leaseback agreement earlier this year. Pemex sold some of its infrastructure assets to the fund, but will continue to operate and maintain them for 15 years and pay rent to KKR.

What all this means is that gasoline south of the Border has risen to US$4.00+ per gallon. While that number makes eyebrows raise if it's in the USA, you need to remember that a good living family wage across the border in Tijuana, Mexico is US$200/week. Thus, filling your car's tank will cost you 25% of your take-home.

The Wall

The Border Wall is coming and it's going to work. Mexico will pay for the wall. Thus, Mexican families south of the wall won't be able to rely on illegal aliens running north to work and send money south. Mexico takes in about $2 billion a month in remittances. The Bank of Mexico tracks how much the country receives in remittances on a monthly basis. In 2015, Mexico took in nearly $25 billion in total. Mexicans are concerned.

Peace Offering and NAFTA

Mexico (somewhat suddenly) extradited Drug Kingpin Chapo Guzman to the US for President Trump's inauguration. They did this to curry favor, hoping to show that their heart is in the right place with the upcoming NAFTA renegotiation.

80% of all Mexican exports go to the USA, and Mexico is America's largest trading partner. There was a huge sucking sound when President Slick Willy (Bill) Clinton signed NAFTA, with jobs and money flowing to Mexico. Now, Mexico is very concerned that the sucking sound will be heard going in the other direction.

The exchange rate was 17 pesos to the dollar last year at this time. Today it's 22 pesos to the dollar, and Mexico has moved hard to keep it at that rate. Without MEXGOV intervention it would be much worse.

With the wall going up and the flow of illegals stymied to a bottleneck (it will never stop because where there is a will...) I fear the many of the Mexican and TexMexx restaurant will have to close down. I'm glad we don't have this problem with Japanese or Italians. Outside the Waffle House, I would starve.

I'm of two minds regarding Mexico. I have more than a passing knowledge of the subject, having spent 30 years arresting illegal aliens, and having had fascinating conversations with hundreds of them. ("Ignorant" campesinos can be surprisingly well-informed and informative.) And, of course, I've read a book or two. On the one hand, illegal immigration does in fact drive down wages, increase crime rates, etc. On the other, the United States is an important part of Mexico, in a sense. The Mexican economy basically has four components: Cattle, tourism, drugs, and remittances from illegal aliens in the U.S. Take away the release valve of illegal immigration, and Mexico is very ripe for a violent revolution that will certainly spill over into the U.S., both on the border and in the big cities of the U.S., where the different factions will engage in internecine warfare that will make the Crips/Bloods and People/Folks gang wars look tame. Mexico is and has always been a kleptocracy,and now it's a narcocracy on top of that. What's the solution? Beats me.

Housekeeping

As of January 1, 2017 this blog began to receive anonymous posts. I try not to delete them, but if you want to be taken seriously here, you need to identify yourself, if only by some sort of cryptonym.

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"But I don't want to go among mad people," Alice remarked.

"Oh, you can't help that," said the cat. "We're all mad here. I'm mad, you're mad."

"How do you know I'm mad," asked Alice?

"You must be," said the cat, "or you wouldn't have come here."

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Today, I balance work and play as much as anyone can. All things remaining equal, play is more important. Life is short - it's important to make every day count for something, if only to yourself.
I'm a former tinker/tailor/soldier/sailor who has now decided that maybe it really wasn't all done for nothing.

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